The views expressed in this report are those of the authors. Their statements are not necessarily endorsed by the affiliated organisations or the Global Challenges Foundation.

What new kinds of risks arise from globalisation? In our interconnected age, productive, technological and socio-political systems around the world have become interdependent. As a result, seemingly minor events can quickly ripple into large consequences, and impacts are increasingly difficult to anticipate, both locally and globally. This new situation calls for new models of risk governance.

Since the end of the 1990s, a new type of risk has emerged, which we may describe as global systemic risk. This type of risk has two main characteristics. On the one hand, patterns of cause and consequence are increasingly hard to discern. On the other hand, potential impacts can no longer be calculated locally, nationally or regionally, but must be considered on a global scale.

Global systemic risk is characterised by complex causal chains, with potential triggers occurring at distant points in time and space. The chain may start with a large sudden shock (terror attacks, natural catastrophes, technological breakdowns), or take the form of slowly building pressure (environmental, political or social degradation); it ends with massive losses and disruption worldwide. More importantly, even small initial hazards can ripple into larger and larger waves of systemic disruption. In 2006, a local submarine earthquake off the coast of Taiwan destroyed six optical cables, and ended up causing major Internet access failure across East Asia. In 2010, a volcanic eruption in Iceland resulted in the temporary paralysis of global air traffic. Consequences of such seemingly contained local events might reach even larger scales, with catastrophic consequences.

This increasing disconnect between the magnitude of cause and consequence is largely due to the extreme complexity of our current productive, technological and socio-political systems. Globalisation has intensified and diversified exchanges around the world. More broadly, it has increased interdependence between territories, and created conditions where disturbance can spread very far, very fast. This happens across critical information and transport networks, productive and market systems, financial and commercial organizations, and eventually ends up affecting political systems and geopolitical equilibrium.

Small initial hazards can ripple into larger and larger waves of systemic disruption.

We might expect that a large interconnected global system would be less exposed to risk than smaller fragmented ones. However, such a system is vulnerable precisely because of its complexity. Each interdependent relationship can cause a ripple effect, and each internal fluctuation lead to critical change through the system in the form of a chain reaction. The 2008 Global Financial Crisis is an example of such a process. The initial subprime crisis was a local phenomenon, connected to the US real estate market and national banking practices, but its consequences became global. Financial, social, political and even environmental impacts have been and continue to be experienced across the world on a global, local and individual scale, many years after the initial crisis.

Systemic interdependence leads to relative opacity when it comes to understanding risk. Predicting the probability, cost and magnitude of risk is becoming increasingly difficult. In addition, it is harder to anticipate where impact will be felt most acutely. In a globalised world, distinguishing local and global effect is increasingly difficult. Instead, the new norm is ‘glocalised’ risk, merging local and global processes. What happens at the local level both depends and impacts on what happens at the global level, and vice-versa.

Food security may be the best example. Historically, famine and food shortages have been connected to local events (war, natural disaster, epidemics). But food production systems are now globalised. As a result, a localised drought in the US will not result in local food shortages, but affect the cost of cereals on global markets. This reduced availability due to climate variation feeds speculative bubbles on food products. Higher global food prices may have negative impacts on food availabilities in developing countries, particularly when local conditions are already tense, due to droughts or conflict. Local food insecurity in the poorest areas fuels conflict and migration, which become factors of political and geopolitical destabilisation at the local, national and regional scale. Eventually, these tensions might ripple into global disruption.

Traditional models of risk mitigation, centered on the State and framed within national boundaries, are ill-adapted to these new forms of risk. To face them, we must invent new forms of governance that can support coordinated action on a global and a local scale.

Magali Reghezza

Magali Reghezza, Ph.D, is a specialist of natural and environmental risk. She is director of studies at the École Normale Supérieure Department of Geography in Paris, and a member of the National Centre for Scientific Research (CNRS) laboratory of physical geography in Meudon. Her research focuses on urban vulnerability, resilience and adaptation, with particular interest in systemic environmental risks in the Paris metropolitan area.